Trader Talk

USDX: 92.20

USDX initially traded down as the news of Fed Fischer resigning with short termination notice, but the US Debt ceiling news was a positive for USD to end the US session.

The US ISM Non-Manufacturing data was less than analysts’ expectations, but the US Trade balance data was good in a mixed night for USDX.

The Geopolitical rumblings surrounding the N Korean situation seem to be overshadowing the USD sentiment, and the probability of Fed rate hike in December seems to be also dwindling.

USD JPY: 109.15

USDJPY reacted swiftly this morning on the Asian open on more speculation of North Korean missiles to be launched on September 9th.

When this news reached the Newswires and USDJPY moved down from 109.40 to lows of the day of 108.90 before recovering well to 109.15.

USDJPY is certainly skewed to the downside with the North Korean tension not getting any further away in trader’s minds, but I feel that more likely the 108 handle will be seen before 110.

I have a near term level of 108.80 in sight as the Geopolitical headlines dominate plus the risks are there that the US rate hike is not happening in December.

EUR USD: 1.1925

Euro traded in thin ranges to start this week, seeing the movement of about 20 pips either side of 1.1900 as I called on Tuesday. The EUR is in a wait & see mode approaching the headline risk event from the ECB tonight.

In the short-term though, the EUR story may continue to hold tighter ranges as markets await the key ECB announcements on Thursday, but volatility was high on Friday as a leaked story of the ECB delaying the QE unwinding announcement was out in the markets.

That makes the SHORT EURUSD and EURJPY trade in play and interesting this week.
For that trade to work we need the ECB to disappoint with the timing of their QE unwind announcement.

GBP USD: 1.3045

The Sterling drifted higher on Wednesday but came back off highs around 1.3080, to settle down near 1.3050.

This move higher in the Sterling against the Greenback certainly is fuelled by softer USD.

Will it get through the 1.3100 handle again? I doubt that, I think a move more likely towards 1.3000 is on the card for GBPUSD.

We are seeing larger than normal fees on the table for the Brexit divorce from the EU, so that can drag on GBP sentiment, but as always, a move lower in GBPUSD may be fuelled by a USD comeback in the short term anyway.

A great pair to look at intra-day which whipsaw ranges, but the longer-term direction is quite a task to get correct

AUD USD: 0.8000

AUDUSD has had a wild week, taking off to 8030 last night in US soft dealing in the New York session.
This morning our local Aussie retail sales data were both a miss, which is likely to drag AUD down, but not much.

The Aussie is ripe with volatility again this week, dragged slightly lower on Monday by risk off flow for the North Korean headlines, but getting a lift from the USD falling midweek as US Fed Fischer resigned overnight.

The RBA held the cash rates for Australia but Gov. Lowe also in his speech on Tuesday evening pointed to the next move being higher for AUD rates, even if not soon.

NZD USD: 0.7215

The Kiwi seems capped under 7250 after last night’s push higher as the US Treasuries dipped dragging USD lower against all of the major FX pairs.

There was a sharp reversal as the news that Trump made a debt ceiling deal with the Democrats in the US, for a 3-month extension on their key debt ceiling. That made USD stronger to end last night’s US session, dragging Kiwi-Dollar back from 7250 to 7180.

Very wild volatility for the NZDUSD which reflects the good opportunities on this pair as a nice way to play the USD sentiment in the FX game.

USD CAD: 1.2230

Dollar-CAD was absolutely crunched yesterday as the Bank Of Canada raised interest rates to 1.00%.

I was expecting a Canadian rate hike but (later this quarter) which you would have seen in the easyMarkets Trader Talk weekly outlook video, however now the speculation and the data points to another potential hike later this quarter.

The continued slide lower in the USDCAD is potential as the USD has seen a dwindling sentiment towards the US Fed ability to raise rates.

This divergence trade is in full swing, seeing lows as low as 1.12130 before bouncing back one big figure.

VIX: 11.63

The volatility index has come alive this week and Stocks have hung tough in the face of the current market sentiment.

The North Korean tension don’t seem to be simmering down at all, which is likely to hurt Stocks and push the VIX much higher, possibly towards 15.

The markets seem to be building for a spike higher in VIX and correction in stocks will follow. Just a matter of When.

GOLD: $1,334

Gold traded sharply higher this week, getting to 1341 late in the London session again yesterday before the USD came back, and Gold dipped lower.

Large moves in Gold seem to be the norm in this market so I maintain my view that $1357 or $1400 may win the day in the near-term, fuelled by growing tensions in the Korean conflict.

I am mindful of the idea of some diplomatic headlines from the US helping pull Gold back towards 1320, but still, favor a wider target on the upside from here.

OIL (WTI): $49.15

Oil is holding firmly the $49 price area as another severe Hurricane heads towards the Gulf coast in the southern US.

That is supportive to the Oil price and with Russian oil minister supportive of OPEC output cuts to continue to the year-end, we should see a grind towards $50/$52 as I have been saying for some time.

Risk off dangers also skew the Oil price to the upside and thus $50 seems very likely this week as the dominant price level.

Macro Themes in Play

• North Korean have markets on edge with another missile test possibly September 9th
• Gold is holding gains around 1334, and USD seeing wild swings in sentiment
• Holding patterns for EUR as ECB this Thursday is crucial for EUR Sentiment